The Dow Jones Industrial Average is one of the most prominent and talked about U.S. market indexes. It is a basket of 30 major companies in many different industries, so investing in an exchange-traded fund (ETF) that tracks the index grants investors some level of diversification and could be a great, effortless way to earn solid returns over the long run.
But some individual companies can beat even the mighty Dow Jones, and one of them is biotech giant Eli Lilly (LLY 1.19%). The drugmaker has crushed the Dow over the past decade, and it isn't even close. Here is why Eli Lilly can pull that off again in the next 10 years.
Plenty of growth drivers ahead
At first glance, it might seem like Eli Lilly isn't doing well. The company's revenue and net income have been up and down over the past year and a half.
LLY Net Income (Quarterly) data by YCharts
However, raw numbers rarely tell the whole story. Like many other companies that found success in selling coronavirus medicines, Eli Lilly is seeing its COVID-19-related sales drop, dragging the rest of its top line down with it. Here's the good news: Excluding COVID-19 sales, Eli Lilly's revenue increased by 10% year over year in the first quarter, which is good for a biotech giant.
The company's important growth drivers, from diabetes medicine Trulicity to cancer drug Verzenio to immunosuppressant Taltz, and Jardiance, an antidiabetic medication, all saw solid sales growth. Trulicity, the best-selling among them, reported revenue of 14% year over year to nearly $2 billion. Verzenio was the fastest-growing of the bunch; its sales soared to $751 million, 60% higher than the year-ago period.
That's not counting Mounjaro, which only earned approval in May 2022 and is already among Eli Lilly's top-selling medicines. It generated $568.5 million in revenue in the first quarter. Eli Lilly's current portfolio is capable of delivering solid revenue and earnings growth for a while, especially once coronavirus-related dynamics on the company's results subside.
But the drugmaker is also on the verge of earning new approvals and label expansions. For instance, Mounjaro's growth story is only getting started as it could become one of the best-selling medicines in the industry's history. Elsewhere, Eli Lilly's donanemab recently aced a phase 3 study in treating Alzheimer's disease.
The company should also eventually earn approval for mirikizumab, which aims to treat immune-related diseases and failed to get approval earlier this year only because of manufacturing issues. Also, Eli Lilly is developing insulin efsitora alfa, a potential once-weekly insulin product that could be a big deal, considering diabetes patients typically take insulin daily. This program is in phase 3 clinical trials.
The company also has promising programs in earlier stages, including retatrutide, a diabetes medicine currently in phase 2 trials. Eli Lilly's overall prospects look excellent, and that's a key reason it has continued to beat the Dow Jones and can still do so.
The dividend is growing fast, too
Those who opt to reinvest dividends can significantly boost their returns over the long run. Eli Lilly's total returns over the past decade, including dividends reinvested, are meaningfully higher than those without dividends.
Over this period, Eli Lilly has raised its payouts by 130.6%, which is impressive and supports the claim that the company is a solid dividend growth stock. Some might point to the drugmaker's dividend yield of 0.99%, which is even lower than the S&P 500's average of 1.54%. Still, the strength of a company's business and its prospects are arguably even more critical factors than its yield for dividend investors to consider.
Given Eli Lilly's highly promising lineup and pipeline, investors can expect the company to support its dividend and continue beating the Dow Jones from here on out.
